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STUDY: JOB FEARS FROM OUTSOURCING NOT BACKED BY DATA!
Reuters ^ | 10/8/04

Posted on 10/08/2004 8:40:07 AM PDT by areafiftyone

SINGAPORE (Reuters) - Fears that an exodus of white-collar jobs to India and other low-wage economies will lead to massive employment losses in rich countries such as the United States and Britain are not backed up by the facts, according to new research.

In a working paper for the U.S. National Bureau of Economic Research, two International Monetary Fund staffers discover no evidence that job growth in Britain is slower in those sectors with a quicker pace of service outsourcing.

They also find no link between job losses and outsourcing in the United States because outsourcing, by boosting firms' efficiency, creates enough new jobs to offset the initial losses.

"The risk of service outsourcing dramatically reducing job growth in the advanced economies has been greatly exaggerated," IMF researchers Mary Amiti and Shang-Jin Wei write.

Their findings chime with similarly positive assessments by analysts including Diana Farrell of McKinsey Global Institute in San Francisco and Catherine Mann of the Institute for International Economics in Washington.

But outsourcing remains a political hot potato.

In the race for the White House, Democratic candidate John Kerry has blamed President Bush for a shift of white-collar and manufacturing jobs overseas.

In Britain, unions have led opposition to the trend, which was underscored on Thursday when Reuters Group Plc said it planned to make Bangalore in southern India its biggest information-gathering hub. The news provider will employ as many as 1,500 people there, or 10 percent of its workforce.

While outsourcing has been increasing steadily, Amiti and Wei say it is still at very low levels.

NO PROOF

In balance-of-payments statistics, outsourced services count as imports. In the United States, such imports of computing and business services have roughly doubled since 1993 thanks to the growth of fast, cheap telecommunications but were still only 0.4 percent of gross domestic product in 2003 In Britain, the share was 1.2 percent.

Outsourcing as a share of GDP is much more important in smaller countries. Angola, Mozambique and Ireland all import business services exceeding 10 percent of GDP.

Ironically, India also imports a larger share of business services (2.4 percent of GDP) than the United States or Britain.

"In sum, the notion that large industrialized countries outsource more intensely than other economies is not supported by the trade data," Amiti and Wei write.

A narrow focus on outsourcing also ignores the fact that trade in services, like trade in goods, is a two-way street, the NBER paper says.

In dollar terms, the biggest exporters of business services -- "insourcers" in the paper's shorthand -- are industrialized countries led by the United States, Britain and Germany.

India ranks only sixth, although as a share of GDP (3.8 percent) business exports contribute more to the local economy than in the United States (0.6 percent) or Britain (2.4 percent).

Putting the figures together, the United States and Britain emerge as the two biggest net service exporters and would be the biggest losers in net dollar terms if outsourcing disappeared; the U.S. current account deficit would widen, not shrink.

"To sum up, the presumption that global service trade is dominated by lopsided one-way outsourcing from developed countries to developing countries is not supported by the data," Amiti and Wei write.


TOPICS: News/Current Events
KEYWORDS: drinkthekoolaid

1 posted on 10/08/2004 8:40:07 AM PDT by areafiftyone
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To: areafiftyone; Willie Green
Willie Green ain't gonna like this.

Employers bad. Government good.

2 posted on 10/08/2004 8:42:19 AM PDT by E. Pluribus Unum (Drug prohibition laws help fund terrorism.)
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To: areafiftyone

Doesn't matter. Facts need not apply for this election.

</cynicism>


3 posted on 10/08/2004 8:43:40 AM PDT by Rutles4Ever ("...upon this rock I will build my church, and the gates of hell shall not prevail against it.")
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To: areafiftyone
STUDY: JOB FEARS FROM OUTSOURCING NOT BACKED BY DATA!

Great, then the rats won't be able to lie about it. NOT!!

4 posted on 10/08/2004 8:44:25 AM PDT by Puppage (You may disagree with what I have to say, but I shall defend to your death my right to say it)
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To: E. Pluribus Unum
Reuters is in the process of changing it's name to "The Voice of India"

Reuters to shift 50 percent of data operations to India, add 860 workers

5 posted on 10/08/2004 9:01:06 AM PDT by Willie Green (Go Pat Go!!!)
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To: areafiftyone
Geez...this report is from Reuters? Whodathunkit? Especially on the day of a Presidential debate.

I guess they didn't see the DNC talking points memo for today.

6 posted on 10/08/2004 9:03:12 AM PDT by Bloody Sam Roberts (Which Star Trek Capt. would you want for President? Picard or Kirk? In wartime, the choice is easy.)
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To: Willie Green

these rash of big corporate layoffs in the news the past few days - places like Bank of America, other white collar and tech companies - there is an offshoring component to EVERY SINGLE ONE OF THESE LAYOFFS. Not accounting for all of the cuts announced, but some percentage of every cut. I guarantee it.


7 posted on 10/08/2004 9:05:17 AM PDT by oceanview
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To: areafiftyone

LOL- Reuters knows a thing or two about outsourcing.


8 posted on 10/08/2004 9:27:06 AM PDT by Lil'freeper (You do not have the plug-in required to view this tagline.)
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To: Willie Green
Reuters is in the process of changing it's name to "The Voice of India."

Hahahaha! I knew it! Good news is bad news!

The pharmaceutical industry can thank it's lucky stars for cynical, depressed people like you.

Who else would by all that Prozac and Paxil?

9 posted on 10/08/2004 9:53:34 AM PDT by E. Pluribus Unum (Drug prohibition laws help fund terrorism.)
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